GBP CAD Exchange Rate Stable in Wake of Fed Policy Meeting

September 21, 2017 - Written by John Cameron

STORY LINK GBP CAD Exchange Rate Stable in Wake of Fed Policy Meeting

The Pound Canadian Dollar (GBP CAD) exchange rate is trading in a narrow range this morning in the wake of a key monetary policy decision by the Federal Reserve.

Canadian Dollar (CAD) Struggles to Advance following Fed Announcement

The Canadian Dollar is struggling to advance in today’s session largely due to the strength of the US Dollar (USD) in the wake of the Federal Reserve’s latest monetary policy meeting.

Investors flocked to the ‘Greenback’ yesterday evening as the Fed made an announcement that it was begin the process to unwind its considerable $4.5 trillion bond portfolio, in a move that had been widely anticipated by markets.

Fed Chair Janet Yellen announced that the Bank would begin cutting its stimulus programme by $10bn a month starting in October as it seeks to reduce its balance sheet without adversely impacting the US economy.

Further bolstering the appeal of the US Dollar yesterday were hints by the Fed that it still planned to pursue a third rate another interest rate rise this year, causing market odds of a December rate hike to jump to over 80% according to CME’s
FedWatch Tool.

Pound (GBP) Stable as UK Public Borrowing below Expectations

Meanwhile Sterling was able to stabilise this morning as latest public finance report from the UK beat forecasts.

According to data published today by the Office for National Statistics (ONS) the UK’s public sector was forced to borrow £5.09bn last month in order to balance the book, beating expectations of the government would be required to borrow £6.7bn and registering its lowest August deficit in over 10 years.

The drop in public borrowing last month is also expected to be welcomed by Philip Hammond, with analysts suggesting it will give more wiggle room for the Chancellor to increase spending in his upcoming November budget.
John Hawksworth, PwC chief economist said;

‘Back in March, the OBR forecast that the budget deficit would rise to around £58 billion this year, but the latest data suggest that it may be similar to the £46 billion outturn for 2016/17. This would imply a budget deficit of just over 2% of GDP this year, which is already close to the Chancellor’s medium term target for the deficit in 2020.’

‘All of this suggests that the Chancellor should have room for some easing of austerity in his Budget in November. This could involve extra money for priorities such as the NHS, social care, housing and infrastructure investment as well as some further relaxation of the public sector pay cap.’

GBP CAD Forecast: All Eyes on PM’s Brexit Speech Tomorrow

Looking ahead the GBP CAD exchange rate is likely to seen some movement on Friday as Prime Minister Theresa May is set to make a key speech on Brexit in Florence tomorrow.

The PM’s spokesperson said that the speech will provide an ‘update on Brexit negotiations so far’ with observers expecting May to announce plans to seek a transitional agreement with the EU, with the UK to remain part of the single market for unspecified period after Brexit negotiations have concluded, in order to minimise disruptions to UK businesses.

May is also expected to offer financial reparations to ensure that the EU’s current budget is not impacted by the UK’s departure.

The impact of the speech on the Pound will be largely dependent on the EU’s reaction to the speech, with any signals that EU officials may see it as being unfeasible likely to cause Sterling sentiment to tumble.

Meanwhile the Canadian Dollar may rally tomorrow if oil prices are lifted by the latest meeting of OPEC members as they are set to discuss the possibility of extending their or increasing the production cuts currently in place, with any agreement likely to send crude markets higher

Current Interbank Exchange Rates

At the time of writing the GBP CAD exchange rate was trending around 1.6683 and the CAD GBP exchange rate was trending around 0.5993.

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TAGS: Pound Canadian Dollar Forecasts